Lai See

PUBLISHED : Wednesday, 20 July, 2011, 12:00am
UPDATED : Wednesday, 20 July, 2011, 12:00am

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Ratings agencies have uncanny knack for getting it right

What is it with the ratings agencies that without a hint of shame they belatedly show up weeks after an event and with Delphic-like assurance tell us what's wrong with a company's credit status?

Yesterday Moody's, one of the top three credit rating agencies, lowered its rating for Sino-Forest, a mainland forestry company listed on Toronto's stock exchange and one of the stars of the current rumpus over corporate governance among private-sector mainland companies.

Moody's has downgraded its ranking from Ba2, which in its nomenclature means that the rated debt obligations are 'judged to have speculative elements and are subject to substantial credit risk', the agency says on its website.

The new rating is B1, which means that the debt is considered speculative and subject to high credit risk. This seems an understatement verging on the surreal if you look at a recent chart of Sino-Forest's 2017 bond. In mid-May the price began to weaken significantly before falling off a cliff in early June with no word from Moody's. Before the crisis, the bond was trading at US$101.688, collapsing to US$40 on June 22, though it has since recovered slightly to about US$50.

The Moody's action comes a day after Fitch, another rating agency, also woke up and noticed that its rating for Sino-Forest needed to be aligned to reality. It withdrew the rating on Monday.

Ken Chan, a Moody's vice-president and senior analyst, said the rating action 'reflects Moody's expectation that Sino-Forest's operations have been adversely impacted by the current investigations conducted by its independent commission on its sales, plantation assets and authorised intermediaries'. He added: 'Its financial performances are expected to weaken and therefore be more appropriately positioned in the single-B level.'

Coming more than a full month after Sino-Forest's share price collapsed, this is a statement of the blindingly obvious. You wonder how these guys stay in business.

Gulfstream's delayed take-off

What's in a name change? Deals worth millions of dollars is the answer, if a move by Gulfstream proves successful. The US maker of business jets recently confirmed that it is changing the name of its G250 mid-sized jet, which can fly nonstop from Hong Kong to Dubai, to G280.

The company said the move was prompted by the company's 'sensitivity to the varied cultures of its international customer base'. The company adds: 'Since introducing the Gulfstream G250 in 2008 and presenting it to customers around the world, we determined that G280 is a more amenable number sequence in certain cultures,' said Larry Flynn, Gulfstream senior vice-president for marketing and sales.

The word on the apron is the name change follows less than stellar sales in Asia. Gulfstream will be hoping that changing the '5', which is associated with the bad old days of Chinese emperors, to '8', which is linked with prosperity, will lead to a commensurate shift in the company's fortunes. The aircraft has been in development since 2008 with the first deliveries scheduled shortly. Why, we wonder, has it taken Gulfstream three years to find out the aircraft's less than auspicious previous incarnation.

Harmless execution list

A former commodities trader pleaded guilty earlier this week in New York after threatening to kill more than 40 financial regulators, including the heads of the US Securities and Exchange Commission and the Commodity Futures Trading Commission.

Vincent McCrudden, 50, admitted in court that he posted the threats on his company's website last December, Reuters reports, asking for help executing his plan.

'These people have got to go! And I need your help, there are just too many for me alone,' McCrudden wrote in one post, according to the indictment. He pleaded guilty to two counts of transmission of threats to injure and faces up to 10 years in prison.

McCrudden worked on Wall Street for more than 20 years, specialising in commodities, derivatives and foreign exchange, according to his biography on the website of his company, Alnbri Management.

'This defendant crossed the line when he directly threatened to kill public officials who were working to keep our financial markets fair and open, and invited others to join him,' said Loretta Lynch, attorney for the Eastern District of New York.

McCrudden's lawyer called his client 'a talented, decent guy who will find other work'.

But maybe not in this life, we think.

 

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